Bryan Caplan  

Bob Murphy's Question

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In the comments, Bob Murphy writes:

When Bryan says the first-best solution is to tax education, is he just making a point that there are negative externalities? In other words, does Bryan also think a government tax on pollution is the optimal thing?

"Optimal" in the sense of first-best Kaldor-Hicks efficient, yes.  Of course there are many background assumptions here, too: That government knows enough to pick the efficient tax rate, that the deadweight costs of collection exceed the deadweight costs of bargaining, etc.

I realize he brings up public choice issues, but the standard libertarian anarchist objection to taxation (even in cases of negative externalities) goes beyond mere public choice arguments.

As I see it, the standard libertarian anarchist objection to taxation is moral: Even if a tax is first-best efficient, we shouldn't do it.  I discuss my full views on Pigovian taxation here.

So I'm asking, before I get all worked up and perhaps write an article over at Mises.org explaining what's wrong with Bryan's view here, can someone point me to a discussion where he spells out his views on when it's a good idea to tax something?

Again, there's "good idea" in the sense of economically more efficient, and "good idea" in the sense of morally right.  My approach to economic efficiency is straight out of the textbook (or better yet, Landsburg), though I naturally think that most economists have a big statist bias when they apply the concept.  Morally, I don't buy libertarian anarchist absolutism, but the real-world efficiency case in favor of taxation isn't strong enough to overcome the presumption against taking people's property without their consent.


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COMMENTS (6 to date)
rapscallion writes:

Kaldor-Hicks type efficiency should be understood as a purely theoretical concept that is of no use whatsoever in determining "optimal" taxation. Indeed, the idea of "optimal" tax rates from a general welfare point-of-view should be abandoned.

If you assume rational agents, whatever you observe should be interpreted as efficient because everyone will be doing their best to get what they want. If someone isn't doing something, it must be because the costs exceed the benefits. Arguing for a policy change is equivalent to arguing that someone is being stupid/irrational. But if people are stupid, you can't rely on observed prices for cost-benefit analysis, so you're screwed either way making general welfare arguments for policy changes.

siredge writes:

I find it interesting that the phrase that sticks with me from the history classes of my youth was "taxation without representation." It wasn't a question of consent but rather representation in how the tax is levied and how the money is spent which should enable the people being taxed to ensure they receive adequate benefit relative to the taxation burden.

Does that have any impact on the morality of taxation?

David C writes:

Why does there need to be a standard libertarian anarchist objection to taxes?

rapscallion, prices are not the only method of determining optimal policy. In the case of global warming, policy makers are assuming prices will reflect the costs in the future, but do not do so today. They are making estimates of future prices, and incorporating them into present prices to reduce the size of future increases.

rapscallion writes:

David C,

I don't know why you think I disagree with you. I see both prices and government policies as the outcome of market activity, and have no reason to think either inefficient.

My point is that nothing observed--be it a market price or a government policy--can be inefficient (that's why efficieny isn't a useful concept).

Kevin Driscoll writes:

Rapscallion has a point. If a change in prices or government policy constituted a Kaldor-Hicks improvement then it would be undertaken by rational agents. Although those made worse off might object at the start, those made better off would simply compensate them to gain their consent. Those made better off would still profit from the policy change because Kaldor-Hicks improvements improve total social welfare.

That is, unless individuals disagree about what the relative costs and benefits of goods/services/outcomes are. Rational agents can have different preferences. I don't know enough about rational gents and how total social welfare is defined in that situation to say for sure.

Imagine an economy with 2 people and 2 fruits, apples and oranges. It would be a Kaldor-Hicks improvement to produce 15 apples and 0 oranges instead of 6 apples and 6 oranges (I think??). They would undertake this policy change, unless one person does not like apples. Now, the two individuals disagree about what the benefits of increased apple production are.

Neal writes:

Bryan writes:

the presumption against taking people's property without their consent.

But what about the presumption against causing bodily harm to another (in this case, through pollution). The trouble is, its not difficult to see situations where one basic presumption conflicts with another. Can consequentialists have presumptions? (I take Bryan to be a consequentialist libertarian)

E.g. we tax property to pay for police, to stop murder. But we don't tax it enough to stop all murder. Rights are not lexicographic.

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